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E10-3 Thome Company

Price: $1.99

Thome Company uses a flexible budget for manufacturing overhead based on direct
labor hours. Variable manufacturing overhead costs per direct labor hour are as follows.

Indirect labor   1.00
Indirect materials   0.60
Utilities   0.40

Fixed overhead costs per month are supervision $4,000, depreciation $1,200, and property
taxes $800. The company believes it will normally operate in a range of 7,000–10,000 direct
labor hours per month.

Prepare a monthly manufacturing overhead flexible budget for 2014 for the expected
range of activity, using increments of 1,000 direct labor hours.

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